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Economic and Perceived Value Pricing

Real and Perceived Value
The price of a product is reflected based on the financial needs for growth and operation of the company, in addition to consumers’ perceived value of the product. Businesses have a goal of making a profit, which often requires selling items at a perceived value. Real and perceived values are different ways in which products are valued, which are generally based on economic impacts and competition. In addition, the relevancy to the consumer determines the value of the product. If the product or message is not relevant or does not affect the consumer personally, it will not be as effective as if it did.

Advantages and Disadvantages
Value pricing allows companies to influence consumer purchases by offering lower prices for competitive products. Real value is generally easier to measure than perceived value. Factors that increase the value of real value include the cost of labor, materials, marketing, shipping, and product development. Product distribution, marketing efforts, and brand value determine the products perceived value. For example if two competitors are to sell the exact same item, built exactly the same way, and from the same materials, it is likely that the company with the better brand value reputation can sell the item at a higher price because of the perceived value by the consumer. If the consumer perceives the value of the product high, the consumer will likely show more interest. The consumers’ perception of the company’s customer support, trust, loyalty, and product quality determine the products value.

Services and Products
Value pricing attracts value conscious customers. The actual cost of the product production determines the real values. In addition, the real value depends on the usefulness of the product to the consumer as well as the value of the product components. Perceived value is based on how much money the consumer or business believes the product is worth. It is the marketer’s responsibility to generate a positive perceived value of the company’s products. Whether marketing a service or a product, the results are similar in that both rely on the consumers’ perception of the company’s or individual’s expertise, quality, and reputation. In addition, both products and services have other components necessary to complete certain task. While a product may have additional parts and components, a service technician or company is likely to have to purchase tools, software, and other items necessary to complete the service.

Perceived value for individuals looking to invest into higher education tremendously affects the institutions price. Students and family perceive the value of the institution to be within the quality of the education. Consequently, the higher the perceived value of quality, the higher the cost of tuition. Research, however, has not proven a correlation between institutional cost and actual quality. Perceived value of an institution does correlate a student’s likelihood of enrollment. Perceived value of an education has three main factors, which include, quality, cost, and emotional attachment. Failing to satisfy either of these could jeopardize the student’s enrollment potential, as it will affect the students perceived value.

In marketing, generating excitement can also generate a sale and loyal customer. If a user is excited about a product, they may ignore the cost and quality factor. To enroll students into an institution, the marketing and sales team should seek to expose students to information and experiences that excites them and builds passion for the brand.

Real and perceived value offers many benefits to businesses and consumers. The impact of marketing and social networks real and perceived value in regards to marketing efforts is hard to determine. For instance, LinkedIn is a social network that is said to build business networks and promote expertise. However, it is difficult for a user to determine the real value of a paid account, free account, or whether the service is actually making a difference and producing what its purposed to do.

The LinkedIn site is available in 20 languages, and has 238 million users globally. The Internet-based service is similar to a Rolodex of business contacts. As a user, the platform may be a good place to build a brand, increase online visibility, and grow a professional network. It is the users responsibility to determine what the real value of the LinkedIn platform is based on their needs. Although the real value may be worth the free account, the perceived value could be priceless if the user uses the platform to truly build a network and search for a new career.

If an individual truly believes in the quality and value of a product or service, then the perceived value becomes more valuable than the real value. Online platforms, website, and social networking sites work just as traditional products and services regarding real and perceived value.

Pricing and Expectations

Framing Your Price. You need confidence to make a sale – and you need that same confidence in the product or service that you are selling. Most business strategies are designed so that customers are given the bare-bones option first, and then the business reveals what it can do for its Super Special, Super-Charged Retainer or its “Everything you ever dreamed of” package. By giving your lowest price first and then the higher price, you are cautiously approaching the customer with the idea that they should spend more for a complete service, but not convincing them which package is right for them or their business.

Consider this: which of the following statements is most impactful? You’ll save $1,000 if you buy marketing automation software. Or; You’ll lose 100 customers if you don’t buy marketing automation software. People feel much stronger about the thought of losing something. When you set up your business strategy, emphasize the possible loses if the customer does not take action now. In addition, set up your marketing so that the right package is presented first. Then, if necessary, outline what a stripped-down version of this would cost. Also, emphasize how much more difficult, time consuming, or unattainable achieving the customer’s goals will be if they choose the cheaper version. You’re not really changing anything about what you do. You’re just reframing the conversation.

Outline The Process. Every customer’s goals and challenges are unique, but that doesn’t mean you need to start from scratch when building a sales strategy. If you have a keen understanding of what you do, how to sell it, and how to package it, you should be able to create or customize an existing sales strategy to fit the needs of, and attract, any type of customer. However, this relies on your business having a repeatable and defined selling process. When questioning your customers, you should know:

  • The goals, plans, and challenges of the customer
  • Current customer metrics and key company information
  • The cost to the customer of not doing anything to meet their goals

When building a sales strategy to target your desired customer, the strategy should include:

  • Campaign goals
  • Scope of services and benefits
  • Reporting
  • Success Metrics
  • Timeline
  • Budget

With this framework in place and a defined process for gathering information, it will be much easier to put together a winning sales and marketing strategy.

Set Expectations. Once you have confirmed that the customer is a good fit for your business and the customer has requested more information and an estimate, you need to detail what the purchasing or contract phase looks like. The price estimate or sales collateral is the next step in the commitment process on the part of the customer. It should confirm everything you have already spoken about and solidify the deal.

There is no magic trick to selling. There shouldn’t be some big reveal. There is no tool for convincing and impressing. The price estimate or contract proposal is a confirmation, in writing, of what your business can do, how it will do it, when it will be completed, and why the customer specifically needs your product or services. It should be the final step prior to a contract being signed, and your business and the customer should both be confident that the deal will close – and soon.

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